Week ahead in business and economics: May 28-31

Water utility Severn Trent will be watched like never before when it unveils
annual results this week, less than a fortnight after it received a takeover
approach.

Seven Trent, which supplies water to more than 4.2m households, will release results this week. It has swiftly rejected the approach from a consortium of the Kuwait Investment Office, Borealis and the Universities Superannuation Scheme.Photo: ALAMY

The company, which supplies water to more than 4.2m households, swiftly rejected the approach from a consortium of the Kuwait Investment Office, Borealis and the Universities Superannuation Scheme.

It said it had “reviewed the proposal with its advisers and concluded that it completely fails to recognise the existing and potential value of Severn Trent”. The company is this week expected to emphasise its potential for growth in areas such as water trading, its strong operating performance and its good relations with regulator Ofwat. Severn Trent has been much more positive than most of its rivals about the regulator and government’s reform agenda to introduce more competition.

Analysts expect the group’s profits before interest and taxation to remain almost flat at £504.6m for the year to the end of March, with underlying pre-tax profits – excluding exceptional items – expected to fall slightly, to £271.53m. Revenues are expected to rise to £1.83bn, up from £1.77bn for the previous year.

Economic week ahead

A slow week for economic news will see both consumer confidence and housing figures released for the US and the UK.

Evidence that mortgage approvals maintained their modest recovery in March, or gathered ground, will help build confidence. In the US, pending home sales data may also help deliver a bit of market optimism. The Nationwide Building Society measure of UK house prices is expected to show the recovery slowly picking up steam.

Official GfK consumer confidence data in the UK on Friday is expected to improve slightly but stay largely negative. In the US, economists will be looking for a repeat of last week’s Michigan sentiment numbers, which hit a six-year high.

Speeches by regional Federal Reserve chiefs in the US will be closely watched to see whether they underline the prospect of quantitative easing being tapered off shortly. The hint from Fed boss Ben Bernanke last week sent global stock markets into a tailspin.

Tuesday May 28

Shareholders in AG Barr are likely to quiz management of the drinks company over its troubled merger with Britvic – which was referred to the Competition Commission by the Office of Fair Trading in February – at the group’s annual general meeting this week. The results of the commission’s review are due at the end of July, and the regulator could demand that brands are sold off.

When the conclusions of the review are in, Britvic and AG Barr will decide whether to renegotiate the deal, or abandon the tie-up altogether.

Indeed, Britvic last week unveiled encouraging first-half results as well as its strategy to grow as a stand-alone entity.

Furthermore, the Britvic deal is not the only potential M&A that AG Barr has been linked to recently. Since the referral by the OFT, it has been speculated that AG Barr could look at an alternative deal to acquire Ribena and Lucozade from GlaxoSmithKline, the pharmaceuticals giant.

AGMs for Bioquell, Centrica, DRS Data and Research Service, Fiberweb, Interserve and Microgen

Wednesday May 29

Brewin Dolphin will release its financial results for the six months to the end of March. The results will be the financial group’s first since it announced a reshuffle of its senior management and loss of several jobs.

The figures will be closely watched for what the wealth manager says about trends in the industry amid tough competition for business, while investors will also be looking for news on further cost cuts after the group launched a strategic review in 2011.

Numis analyst David McCann said: “Nearly two years into the business review, we think shareholders may, quite rightly, start to lose patience if the results do not start to show signs of margin improvement soon.”

De La Rue, the world’s largest bank note printer, has had its fair share of challenges in recent times, not least the decision by the Bank of England to put its £1bn banknote contract out to tender.

The company publishes annual results this week for the year to the end of March. The consensus in the City is that revenues will fall from £528m to £503m, but that pre-tax profits will increase from £33m to £61m.

Thursday May 30

A week after Prince Harry showed the Queen his B&Q Sentebale Forget-me-not Garden at the Chelsea Flower Show, the owner of B&Q, Kingfisher, will update the market on trading. It has been a tumultuous period for the DIY industry, with Kingfisher suffering a 5pc drop in like-for-like sales last year in the UK amid pressure on the economy and cold weather. Analysts will be looking for an improvement on that over the past three months, although the UK weather has remained mixed.

Tate & Lyle, the maker of sweetener Splenda, updates the market on its full-year results and management will no doubt hope the numbers do not provoke a sour reaction from investors. The group reassured the market in March that it had a solid run-in to the end of the year. Jefferies analysts have forecast annual sales of £3.2bn, up from £3.1bn a year earlier, and Charles Pick, analyst at Numis, expects a final dividend of 18.6p.